Small Business Blog

Financial Statements 101

Having up to date and accurate financial statements is key when applying for financing. Below are the main financial statements any lender will ask for when you apply.

Balance Sheet

A balance sheet gives a snapshot of your business’ financial situation at a specific point in time. It’s called a balance sheet because it has to balance out. It adds up all of your assets, subtracts all of your liabilities, leaving you with the current net value of your business, or your equity. Assets are everything from cash on hand to your business’ delivery vehicle and liabilities are what you owe.

Income Statement

An income statement, also called a profit and loss statement, shows how profitable your business is over a given time. They are typically prepared monthly, quarterly, and/or annually. It helps you answer questions like “how much am I making?” and “how much am I spending?” by lining up your revenue and expenses over your chosen time period.

Debt Schedule

If you have taken out debt at any point, it is a good idea to keep a debt schedule handy. It tracks who you owe, how much you originally took out, what your payments are, and your remaining balance. If you decide to refinance debt at any point you will be asked for this document.

Financial Projections

Financial projections are another thing you’ll be asked for if applying for a loan. Most lenders want to know what the next few years will look like both in terms of how much revenue you expect to generate as well as your future expenses. At a minimum, it’s a good idea to have three years of projections on hand in the form of an income statement. To start creating your financial projections, look at historical results, industry averages, and talk to other business owners who are willing to share their results. Your projections often live in your business plan, which will have additional information that supports your projected numbers.

To learn more about more about financial statements and how to create them, visit: sba.gov.

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